How to Reduce Costs For Your Startup or Small Business
7th November 2019
Anyone who’s ever started their own business knows that the process isn’t cheap — and that costs can quickly add up. According to the Wells Fargo Small Business Index, small business owners typically need $10,000 on average to even bring their vision to fruition. However, the Kauffman Firm Survey actually suggests that the amount of startup capital small business owners require is closer to $80,000. In other words, every penny counts. Whether your small business launch is fast-approaching or you’ve been in business for over a year and are having trouble minimizing your expenditures, you might want to get a bit more creative in your quest to reduce operational costs.
Encourage Remote Work
Relocating your business can allow you to downsize or find a building with more affordable monthly rent. And since 11% of the U.S. population relocated in 2017, it’s certainly an option you might want to consider if these costs are becoming infeasible. But you might also want to think about the possibility of not having permanent offices at all.
Telecommuting can allow businesses to save an extraordinary amount on monthly expenses, as utility usage, commuting costs, and the need for shared equipment and supplies will decrease. Although fiber optic networks can transfer 15.5 terabits of data per second, you may not need to maintain that technology yourself to get the work done. And since 50% of the U.S. workforce holds a telework compatible job, it may be easier to implement this method than you think. Moreover, 80% to 90% of workers want to have the option to telecommute at least part of the time. Since more flexible work options can translate into higher productivity, lower turnover, and better job satisfaction, allowing employees to work remotely and eliminating a permanent office space can be a cost-effective solution in more ways than one.
Make Adjustments to Invoices
Cash flow can be an issue for businesses of any size or age. When your clients pay invoices late, of course, this can disrupt your company’s cash flow. Working with an invoice factoring business can allow you to free up capital your business needs, even if clients are late with their payments. Since the factor advances the majority of the invoice amount (typically anywhere from 70% to 90% of the total), you don’t have to tie up nearly as much in on-time payments owed.
In addition, you might want to consider paying due invoices early whenever possible. As long as your cash flow won’t be negatively impacted, try to pay invoices ahead of their due date. Many vendors will provide a discount if you pay in full within 10 days, rather than 30 days. While this discount percentage may be only 2% or so, those savings can definitely add up over time. In addition, you can facilitate better bookkeeping and budgeting processes and avoid any late payment snafus.
Be Cautious When Hiring
If your startup or small business is starting to take off, you might be inclined to hire a bunch of new employees to help shoulder the load of work. But before you get ahead of yourself with finding the best candidates in the area, you might want to take a breath. If you hire too many people too quickly, you might find yourself facing the possibility of layoffs or unexpected financial issues. In these cases, it’s better to be a bit conservative. Start by hiring for the positions you absolutely need to fill right now, rather than thinking too far ahead. Otherwise, you’ll end up paying the salaries of employees you might not need.
You may also want to take advantage of independent contractors or outsource certain needs to prioritize your bottom line. Freelancers and contractors certainly cost less to hire, as their rates may be negotiable and you won’t need to pay taxes or benefits. You can also outsource anything from web and graphic design to accounting and admin work as needed, which can save substantial funds and allow you to scale in the future.
While you probably keep your budget in mind during every big decision, it’s not always easy to know where the best savings will come from. With these tips in mind, you can keep expenses low without sacrificing your commitment to customers — which will hopefully allow your company to grow and succeed in the long run.